How Perpetual Futures Dominate Bitcoin and Ether Markets, and What SpaceX Taught Us

The process of setting a crypto price is often misunderstood, with many believing it is determined by spot trading. However, the reality is that perpetual futures, also known as perpetual swaps or 'perps', have been the primary drivers of price discovery for bitcoin, ether, and the broader crypto markets for years. These contracts, which are leverage-friendly and never expire, account for approximately 93% of all crypto futures volume, with daily perp volume often surpassing the spot market. A traditional futures contract has a settlement date when it comes due and its price is forced to meet the spot price of the underlying asset. In contrast, a perpetual contract has no such date and can be held indefinitely, with the holder paying a funding rate that varies daily. Research has shown that perpetual swaps on unregulated venues are the strongest instruments for bitcoin price discovery, with regulated futures and U.S. spot exchanges reacting to, rather than leading, these moves. Other studies have identified Binance's perpetual market as the primary source of price formation across the fragmented crypto landscape. While the evidence is not conclusive, and some studies find that spot markets still lead at certain frequencies or during times of stress, the majority of the literature suggests that the derivatives market is where prices are made. 'Historically, we have seen perps leading mostly during bear market price rallies,' said Julio Moreno, head of research at CryptoQuant. 'For example, Bitcoin perps demand growth led the price rallies of January 2026, and April-May 2026.' The funding rate, which is the cost of holding a perpetual contract, is both the tether that keeps the contract anchored to the underlying price and a live readout of market sentiment. Some traders watch the funding rate closely, as it provides insight into the market's direction. However, others see it as just another data point to interpret, and instead focus on predictability and conviction in their positions. The use of perpetual futures contracts is not limited to crypto markets, as seen in the case of SpaceX's initial public offering (IPO). For about three weeks in May and June, traders on various exchanges, including Binance, Coinbase, and Hyperliquid, were buying and selling exposure to SpaceX through pre-IPO perpetual futures contracts. These contracts were structured to track an implied valuation rather than a share price. The striking aspect of this is how accurately the perpetual futures market priced SpaceX's IPO. On the night before SpaceX listed, perpetuals on Hyperliquid and Binance were quoting the equivalent of roughly $170 a share, well above the $135 IPO price set by the underwriters. The next day, SpaceX's stock opened at $161, up 19% from the IPO price, and almost exactly where the perps had it. This gap between the perpetual market's price and the IPO price was where the money was, as traders could buy the contract before listing and bet that the two prices would meet. The perpetual market's ability to accurately price demand, but not supply, is a key takeaway from this experience. As the research suggests, the derivatives market is increasingly where price discovery occurs, and spot markets follow. This is worth remembering every time a bitcoin rally or a flush starts in the funding rate before it reaches spot.